Money-transfer firm Wise boosting London’s hub ambitions

Fintech company Wise rose in its debut following a direct listing on the London Stock Exchange, in the largest such deal ever, bolstering Brexit Britain's capital-market hopes.

The money-transfer company born as TransferWise opened at 800 pence, giving it a market capitalisation just shy of £8 billion, more than double the $5 billion valuation in a July 2020 fundraising. After jumping as much as 4 per cent, the stock traded at 825 pence at 12:30 pm in London.

The company eschewed a traditional initial public offering, opting not to raise fresh funds. Instead, shareholders were offloading a stake of at least 2.4 per cent directly into the open market.

"The successful direct listing of Wise is clearly a boost to London's ambitions as a global hub for tech companies," said Liberum Capital strategist Joachim Klement. "Wise is a highly profitable and fast-growing challenger to traditional banks, that is what counts for investors," he said.

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Wise's first-day pop brought some relief to London, where high-profile new stocks such as food-delivery startup Deliveroo and semiconductor technology firm Alphawave IP have had disappointing trading debuts this year. Wise's listing also rode the tailwind of a rally in tech stocks.

Unlike the traditional initial public offerings for Deliveroo and Alphawave, where banks set a price based on investor feedback during roadshows, Wise’s valuation was determined by demand during an hours-long opening auction.

While Deliveroo was felled by its lofty valuation, investors also baulked at the company’s unequal voting rights. Dual-class shares are controversial in the UK where they are seen as putting new shareholders at a disadvantage, with a select group of backers retaining tight control over the business even after going public.

Wise’s sale will lead to “greater acceptance of enhanced voting rights among more and more investors, particularly growth investors”, said Gavin Launder, a fund manager at Legal and General Investment Management. Still, the “limited amount of stock available in the listing means it could be squeezed a bit too high to start with”, he said.

Wise’s listing follows the British government’s plans to allow dual-class share ownership on the top tier of the London Stock Exchange, where they are currently prohibited. The proposed change is part of a wider effort to make it easier for companies to go public in London.

Wise, which counts billionaire Peter Thiel, Silicon Valley's Andreessen Horowitz and UK-based Baillie Gifford among its early investors, considered listing in the US "but London was the choice", said chief financial officer Matt Briers in a June interview.

Wise was started in 2011 when Estonian-born co-founders Taavet Hinrikus and Kristo Kaarmann grew frustrated with the high fees charged by banks on money sent from London back to their homeland. The firm now has more than 10 million customers.

‘Competing with the US’

It's "a watershed moment for London", said Alasdair Haynes, chief executive officer of Aquis Exchange, a share-trading platform. "While one deal alone doesn't a city make, innovative deals of the kind will help establish the UK as a global hub that can compete with the US."

Wise’s successful debut aside, bankers aren’t anticipating a rush of direct listings in the UK, saying this route to public markets will be limited to a select few well-funded companies with wide investor bases.

Spearheaded by the likes of streaming service Spotify, they are popular among founders of tech startups, and typically used to sidestep hefty underwriting fees and hit-or-miss pricing in traditional IPOs.

But recent stumbles in the US, including by cryptocurrency exchange Coinbase Global’s are raising doubts about this route to market. Companies also can’t raise fresh capital in a direct listing, which only gives existing holders the opportunity to cash out.

While there were no underwriters, Wise retained banks to advise on the listing process, including Goldman Sachs, Morgan Stanley, Barclays, as well as co-adviser Citigroup. – Bloomberg